Federal workers affected by the government shutdown have more than $400 million in mortgage and rent payments due this month, and it could cause chaos for the US housing market

The ongoing federal government shutdown could start affecting
the US housing market soon.

Federal workers not receiving pay owe $249 million in
mortgage payments and $189 million in rent payments this month,
according to Zillow.

Some federal housing programs, such as Federal Housing
Administration loans, Veterans Affairs loans, and US Department
of Agriculture loans, are experiencing delays.

Additionally, the Department of Housing and Urban Development
cannot pay rental assistance to landlords who provide roughly
100,000 low-income Americans with affordable housing.

The ongoing government shutdown looks like it may cause a mess
for the US housing market.

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As the
shutdown enters a record-tying 21st day, a number of worries
are piling up, including looming mortgage payments for federal
workers and missing rent assistance from the Department of
Housing and Urban Development (HUD).

The problems have left workers worried about making ends meet,
potential buyers frozen out of loans, and affordable-housing
experts concerned about evictions.

Missing paychecks mean missed payments

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A demonstrator on January 10, 2019.

source

Carlos Barria/Reuters

The most direct effect of the government shutdown on the housing
market is the increasing possibility that the 800,000 federal
workers who are not receiving paychecks during the shutdown are
going to face a mortgage or rent bill without any income to pay
it.

While the Office of Personnel Management
released guidance for federal employees who may experience
problems, many employees worried that the suggestions - which
include writing letters to landlords asking for a delay - are
woefully inadequate.

"No payments means no gas for our cars, no money for our
prescriptions, our groceries, our rents and our mortgages," Steve
Ching, an electrician who contracts for NASA,
told the Washington Post. "We're all wondering how long our
families will be able to hold out."

Services for homebuyers are experiencing some problems

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TSA agents are working without pay, and lines are getting longer at airports as many have been calling in sick or even quitting.

While Federal Housing Administration (FHA) and Veterans Affairs
(VA) loans are going out during the shutdown, new applicants may
experience delays as FHA and VA employees who work on the
underwriting process are on furlough, which means they aren't
working.

Additionally, the US Department of Agriculture (USDA), which
provides loans for people buying homes in rural areas, is not
processing those requests.

The IRS is also working through a backlog of income verifications
that are needed for some borrowers because the process was paused
when the shutdown went into effect, so some buyers may experience
delays.

Three-quarters of realtors surveyed reported no clients having
issues because of the shutdown. But 22% said a client or
potential client was having trouble, with reasons for disruptions
including:

25% said "the buyer decided not to buy due to general
economic uncertainty, though they were not a federal government
employee"

17% had a client who was unable to get a USDA rural home loan
processed because of the shutdown

13% had a delay because of IRS income verification problems

9% had a delay because of the FHA pausing loans

9% said they had a client who decided not to buy because they
were a federal employee

6% had a seller who could not sell because their move was
impacted by the shutdown

3% had a client who was rejected for a loan because they were
on furlough

3% had a buyer who decided not to buy because they were on
furlough

Affordable housing problems

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President Donald Trump visited the US-Mexico border on Thursday.

source

Leah Millis/Reuters

The housing problems are also threatening to hit some of the most
vulnerable Americans, with HUD experiencing a funding shortfall.

Contracts with 1,150 landlords who offer subsidized units for
low-income Americans have expired during the government shutdown
and another 500 contracts will expire in January, according to
the Washington Post. This means
those landlords will not receive the federal assistance to offset
the lower rent costs, and as many as 100,000 low-income tenants
could face eviction.

HUD has sent letters to those landlords who are no longer under
contract asking for extensions and a HUD spokesperson
told the Post that no one has ever been evicted because of a
shutdown.

But the funding lapse is poised to set the record for longest
shutdown in the modern budgeting era on Saturday - and the
unprecedented length could mean unprecedented effects.